I don’t know about you, but this time of year tends to be when I get a surge of energy to do a bit of general life-admin. One of the things I know will be on the to-do list for many is tackling the annual Self Assessment. In 2019 alone, HMRC reported that a total of 10,833,177 tax returns were submitted, with 735,258 of them being left to the last day 🤯.
Why do so many of us leave it to the last minute? The short answer: because it takes time, energy and money.
I know from my own experience as a freelancer that it always felt that there was something else more ‘urgent’ to do that day that meant I kept putting it off. I didn’t quite leave it to the last day (31st January), but I certainly got close!
I’ve put together a few tips to help make completing your tax return as painless as possible. By starting your prep now, you can feel in total control of your self-assessment, and avoid any last-minute stress when the deadline arrives.
1. Put the important Dates in the diary 📅
These are all the important upcoming dates relating to self-assessment. Even something as simple as putting them in your diary can help you keep on top of things:
5th October 2019
Deadline to tell HMRC about a new source of taxable income or capital gain in the tax year 2019/19
31st December 2019
One month until your tax return is due
31st January 2020
Deadline to submit your online self-assessment for 2018/19 Tax Year and pay the balance on any tax due. 1st payment on account* for Tax Year 2019/20 is also due.
5th April 2020
End of Tax Year 2019/20
6th April 2020
Start of New Tax Year
31st July 2020
Deadline for 2nd payment on account for Tax Year 2019/20
*A payment on account is a tax payment made twice a year by those who complete a Self Assessment tax return in order to spread the cost of the upcoming year’s tax.
As you hopefully spotted, the deadline for registering as self-employed is October 5th, so if you haven’t yet registered - get going!
When you register, HMRC will:
- Send you a letter with your 10-digit Unique Taxpayer Reference (UTR)
- Set up your account for the Self Assessment online service
2. Have your information ready ✍️
When the time comes to fill in your tax return, you’ll want to have all the necessary information to hand in order to make the process as quick and simple as possible.
Here’s a list of everything you’ll need:
- Your Unique Taxpayer Reference Number (UTR)
- Your National Insurance number
- Details of your untaxed income from the tax year, including income from self-employment, dividends and interest on shares
- Records of any expenses relating to self-employment
- Any contributions to charity or pensions which might be eligible for tax relief
- P60 or other records showing how much income you received which you’ve already paid tax on
3. Know what you're required to pay 💰
As of 2019/20, HMRC has made changes to both the personal allowance limit and tax rates for self-employed people.
Every individual has a personal allowance that resets each tax year. This is the amount in which you can earn income tax free. This tax year this has increased from £11,850 to £12,500, but it’s important to note that it changes based on your earnings. Below you can see the impact of your income on your personal allowance.
Your personal allowance will decrease by £1
for every £2 of income over £100,000
£125,000 or over
To find out about income tax rates, see our guides for Sole Traders.
4. Keep track of all your income and expenses 🗂
As the tax year progresses, it’s important to keep a record of all your business income and expenses. This is directly beneficial to you, as keeping these records makes it easier to do your tax return when the time comes, and also ensures you pay the right amount of tax. You should also keep your proof of records for HMRC, just in case they open an investigation for any reason.
Types of ‘proof’ worth keeping include:
- All receipts for any goods, stock or expenses
- Bank statements and cheque book stubs
- Sales invoices, till rolls and bank slips
Try to keep them in chronological order, and if possible, keep a note of what piece of work each record relates to as well.
5. Know what you can (and can't!) claim ✅
When I did my first self-assessment, I was pretty clueless as to what expenses I could claim; it was only thanks to a friend of mine and their last minute advice on business expenses that I managed to save £1,200 on my tax bill. Lesson learned!
Here’s a brief breakdown of some common expenses which can and can’t be claimed:
- Includes: Business-related car or van costs, such as vehicle insurance, fuel, hire charges, repairs, servicing and breakdown cover. Plus - any trips by bus, train, taxi or plane.
- But not: The cost of travelling between home and work (commuting or travelling to your business premises doesn’t count)
- Example: A taxi journey to an external meeting is allowable, but not one to your usual place of work
- Includes: Stationary, printing and ink, computers (and other hardware) and business-related software
- But not: Any software tools on a business computer that are for personal use (e.g. Adobe Photoshop for editing personal photos)
- Example: You can expense a new laptop to design websites for clients, but not a new pair of headphones for your commute to the office
- Includes: Rent, maintenance and repair, utility bills, property insurance, and security
- But not: Any costs relating to buying or building your business premises
- Example: If you work from home, you can apportion a part of your rent (and even utility bills) to be expensed - read more here
- Includes: Newspaper advertising, directory listings, mailshots, free samples and website costs
- But not: Costs for entertaining clients, suppliers and customers, or event hospitality
- Example: Purchasing leaflets for clients is allowable, but buying them dinner isn’t
To see an exhaustive list of all expenses and categories, head over to HMRC's website.
Get going with your tax return 💪
Hopefully these tips can help you get set up for the self-assessment deadline in advance, before panic-mode sets in. For more help when the time comes, check out our step-by-step guide to filling out your return.
If you’re still spending too much time worrying about your finances, maybe now’s the time to give Coconut a try. Afterall, we’re building Coconut to simplify bookkeeping for self-employed people as much as possible. And good bookkeeping leads to simple, hassle-free tax returns.
With it, you can:
- Keep track of your business income and expenses in one simple app
- Take pictures and store copies of your receipts
- Get helpful tips along the way about what you can and can’t claim, helping you maximise savings on your tax bill
- Create, send and manage your invoices straight from the app - we’ll also automatically mark an invoice as paid when a matching payment hits your account
- See how much tax you owe as you earn, so you never get to the end of the year with an unexpected tax bill (currently available for sole traders only)
- Share access to your account with your Accountant
If you want to see what other people are saying, check out our Trustpilot Reviews.
Opening an account is free and only takes a couple minutes. To get started, just head to our main site to sign up or follow the app download links below 👇